Industry
Mergers and acquisitions see a major dip in 2022
Economic uncertainty significantly altered the medical device mergers and acquisitions (M&A) and initial public offerings (IPOs) landscape in 2022 as deal value and volume shrunk compared to the previous year. Deal making experienced a year-over-year dip as investor confidence fell, as did market volatility, preventing the year’s transaction volume from reaching the record-breaking levels that were experienced in 2021. It was one of 11 deals valued above USD 1 billion in the year, compared with 21 megadeals in 2021, according to data from consulting and accounting firm EY. The recession was the one major reason for the slowdown in deal making as many companies’ shares declined in value.
Instead of mega blockbuster deals, M&A activity in 2022 was dominated by smaller deals for start-ups and spin-off companies. Certain sub-sectors led the way, with in vitro diagnostics (IVD) and healthcare IT recording the most M&As in the year, which accounted for one-thirds of deals by volume, and over one half of deals by value.
The top five MedTech M&A deals recorded a combined value of USD 35 billion, a significantly lower sum than the top five of 2021, which totaled more than USD 91 billion. Many of the top deals were dominated by healthcare IT, signaling the continued interest of major technology corporations and institutional investors in this sub-sector.
Top themes
The top themes driving key M&A deals in the medical devices sector in 2022 were:
Artificial intelligence. The private investment firm, Bain Capital, acquired Evident, a provider of specialized health tech for USD 3.1 billion. Among its portfolio is an AI diagnosis tool using image data, alongside an augmented reality (AR) system for a stereomicroscope; and
Big data. Amazon acquired telemedicine provider One Medical for USD 3.9 billion. The company offers in-person and virtual care options and collects patient data, which will be beneficial for Amazon as it looks to strengthen its healthcare presence.
Top M&A deals
Several big companies started the year with plans on being aggressive with acquisitions in 2022. That did not materialize. In fact, MedTech acquisitions were down 85 percent in the first half of the year compared to 2021. However, activity increased in the second part of the year.
Some experts predict that uncertain financial markets will make M&A a bumpy ride and may pause transactions in 2023. The good news is that innovation continues to thrive, and investors are optimistic about what the future holds.
It will be interesting to see how this niche space evolves and identify the strategies at play in its expansion. Technology continues to drive innovation, but money can be harder to come by, and exits are still a challenge for small players trying to justify relevance.
TOP MERGERS AND ACQUISITIONS FOR 2022 IN CHRONOLOGICAL ORDER
Oracle acquires Cerner (USD 28 billion value)
This action was announced in late 2021 but finally closed this year. In a blog on Cerner’s website, the company explains that this acquisition, which merges healthcare with new technologies, is the future of healthcare. Given that there is a real need for coordinated care for patients across numerous platforms, this could not be more obvious. Technology will continue to play a huge role in healthcare, and it is neat to see a company like Oracle addressing this and taking initiative.
Johnson & Johnson buys Abiomed (USD 16.6 billion value)
After a slow period for MedTech mergers, Johnson & Johnson closed out the year by purchasing Abiomed for USD 16.6 billion. The deal was priced at USD 380 per share, 51 percent more than Abiomed’s closing stock price the day before the announcement. The Danvers, Mass.-based company’s shareholders could receive as much as an additional USD 35 per share if the companies reach certain commercial and clinical milestones.
At the beginning of the year, J&J CEO Joaquin Duato said the company would take a more aggressive approach to MedTech M&As, as the company spins out its consumer health business to focus more on pharmaceuticals and medical devices.
Abiomed is expected to complement J&J’s Biosense Webster electrophysiology business, and will operate as a standalone business under J&J’s medical devices unit.
CVS buys Signify Health (USD 8 billion value)
Pharmacy chain CVS beat Amazon in a fierce bidding war to buy home health technology services company Signify Health for USD 8 billion, marking a significant development for the US home health market. Dallas, Texas-based Signify has a network of over 10,000 health practitioners across the country who provide in-home health assessments via an advanced digital platform. CVS described Signify as an anchor asset that will push the American drug store into the home health care space.
Benefits of technological innovations in healthcare
Vikram Sanghvi
Managing Director,
SCHILLER Healthcare India Pvt. Ltd.
Technologies like connected devices, digital twinning, machine learning, artificial intelligence, AR/VR, cloud tech, nanotechnology, wearable technology, robotics and mobile applications have touched all our lives in some way or the other. The medical world has been hugely affected by many of these technologies.
One of the most obvious merits of such technologies is that it has shortened the gestation period of clinical trials. Where previously, clinical trials and the development of new drugs were time-consuming and tedious, new technology, using artificial intelligence, has ushered in seamless monitoring and faster and accurate data analysis; thereby, reducing trial failures and the resources and time invested. The best example of new MedTech assisting in speeding up clinical trials, is the development of the Covid 19 vaccine in only a year, whereas, in the past, vaccine research and development would at times take decades.
New advancements in MedTech improve diagnosis, which leads to a better prognosis. Instead of merely curative care, MedTech is empowering more proactive preventive and personalized care, using accurate predictive algorithms and decision-support tools. For instance, the introduction of PCD in computed tomography scanning is the next-generation technology that captures CT data in multiple energy bands, delivers more precise visualization and segmentation of bone, blood clots, plaque, hemorrhage, intracranial tumors, and reduces the dosages and changes the use of injected contrast.
Equipped with robotics, microbots, nanobots, and the like, contemporary MedTech has improved non-invasive medical procedures, characterized by smaller incisions, less damage, mitigated risks, faster recovery, less pain and scarring, shorter hospital stays, greater accuracy and cost-effectiveness, making many invasive procedures obsolete. Today, minimally invasive procedures, such as cranial stereotactic neurosurgery, ventricular endoscopic neurosurgery, trans-nasal endoscopic neurosurgery, and navigated open neurosurgery, have become the new normal.
MedTech innovations will bring us closer to meeting the existing and potential requirements of healthcare professionals and patients.
Bristol-Myers-Squibb buys Turning Point Therapeutics (USD 8 billion value)
Other notable M&A deals involved Bristol-Myers-Squibb’s USD 8 billion buy of Turning Point Therapeutics, a clinical-stage precision oncology company developing the drug repotrectinib. The drug is tipped to be a promising treatment for lung cancer and the FDA has already granted it a breakthrough therapy designation.
Stryker buys Vocera Communications (USD 3.9 billion value)
Stryker’s purchase of Vocera is an example of medical-devices companies looking to acquire software assets. San Jose, Calif.-based Vocera makes communication and workflow optimization software for hospitals.
Some analysts said they were puzzled over the acquisition after it was announced in January given that it is outside of Stryker’s traditional medical and surgical equipment focus and that it values Vocera 11.5 times higher than its 2022 revenue estimates.
In Stryker’s most recent quarterly earnings call, Jason Beach, vice president of investor relations, said the company is pleased with the integration process even as some installations had been delayed as the company shifts Vocera’s sales force to the Stryker model and plans to move more customers to the cloud.
Thermo Fisher buys The Binding Site (USD 2.6 billion value)
Thermo Fisher strengthens its specialty diagnostics portfolio by acquiring The Binding Site Group and their two tests for multiple myeloma from European private equity firm Nordic Capital in an all-cash transaction. Reuters reports that these tests are on track to deliver USD 220 million in revenue and will significantly contribute to the organization’s bottom line.
Thermo Fisher hopes this deal will close in the first half of 2023 as a major contributor to their specialty diagnostics platform, which accounts for about 10 percent of their business. This sounds like a nice acquisition to me.
Bain Capital buys Olympus Science-Optics Unit (USD 3 billion value)
Olympus continues to restructure its business and has sold its microscope unit, Evident, to Bain Capital for USD 3 billion. This is their biggest diversification to date. They previously sold off their camera business, which was losing money, but the microscope business proved profitable. Still, they want to focus on medical technology, specifically geared toward respiratory, urology, and gastroenterology segments.
Becton Dickinson buys Parata Systems (USD 1.53 billion value)
BD’s purchase of Parata is another example of a software-focused acquisition. Durham, North Carolina-based Parata makes software to automate vial filling, packaging, and central fill for pharmacies. J.P. Morgan analysts wrote that it could pair with BD’s Pyxis line of automated medication dispensers.
BD said Parata could help BD reach its goal of a 25 percent operating margin by the end of 2025. The two companies reached an agreement in June and closed the acquisition a month later.
The purchase has already boosted BD’s revenue. In the company’s fiscal fourth quarter, BD’s medical segment revenue, which includes medication management and pharmaceutical systems, increased 5.8 percent compared to the year-earlier quarter. Still, the company’s overall revenue decreased because of foreign-exchange rates and declining sales of Covid-19 tests.
ArchiMed buys Natus Medical Incorporated (USD 1.2 billion value)
An affiliate of French investment firm ArchiMed acquired Middleton, Wisc.-based Natus Medical, which makes devices to screen, diagnose, and treat neurological conditions. ArchiMed’s MED Platform II fund paid USD 33.50 per share, about 29 percent higher than Natus’s share price the day before the deal was announced.
Natus makes electroencephalography systems, monitors for intracranial pressure, electromyography devices, and hearing assessments. The company was founded in 1987 and has sales in over 100 countries.
Masimo buys Sound United (USD 1.03 billion value)
Masimo acquired Viper Holdings, the parent company of consumer electronics company Sound United. The acquisition is being used to support consumer product launches for Masimo, which makes devices for pulse oximetry and patient monitoring in the operating room, as well as a consumer-facing version of its pulse oximetry device, a bio-sensor smartwatch, and a sleep monitor. Sound United operates consumer-facing audio brands, including Denon, a maker of home entertainment systems, Bowers & Wilkins, which makes speakers and headphones, and Boston Acoustics, which manufactures home speakers.
In early December, Masimo said customers could now connect its passive health monitoring technology to Denon’s HEOS entertainment system and use that to share personal health information with clinicians over Masimo’s servers.
While the acquisition closed in April, the combined company has since weathered some leadership changes. Sound United CEO Kevin Duffy, promoted to president of Masimo’s consumer division, was terminated without cause in July. Two months later, Masimo promoted former Sound United chief commercial officer Blair Tripodi to chief operating officer of its consumer business.
Masimo’s shares have declined by about 49 percent in the past 12 months. The stock fell 37 percent between February 15 and February 16, the day after the acquisition was announced.
ResMed buys MediFox (USD 976 million value)
ResMed struck an agreement to buy German software company MediFox Dan for 950 million euros, or about USD 976 million on the day the deal closed. MediFox makes software for groups that provide healthcare outside of the hospital, including care documentation, administration, and billing.
ResMed’s main business is its sleep and respiratory devices, but it also owns two software-as-a-service (SaaS) brands – MatrixCare and Brightree. The acquisition was intended to complement the latter and help ResMed extend its software business outside of the US.
In a November update, ResMed said it would keep MediFox’s employees, locations, and business processes, with the company reporting to ResMed’s SaaS president Bobby Ghoshal. MediFox has more than 700 employees.
Advancements in infusion technology
Amrith Rangan
CMO,
AKAS Infusions
Infusion pumps are a vital piece of medical equipment that play a crucial role in the administration of medication and other fluids to patients. These devices have come a long way in recent years, with new technologies and advancements that are making them more precise, smarter, and more convenient for patients and healthcare providers.
One of the most exciting advancements in infusion pump technology is the development of more precise and accurate pumps. New technologies, such as micro-infusion pumps and precision-flow pumps, are being developed to provide more precise and accurate dosing, which can be particularly important for patients receiving critical care or chemotherapy. This means that patients can receive the exact amount of medication they need, without the risk of over- or under-dosing.
Another trend in infusion pump technology is the development of smart pumps. Many infusion pumps now come equipped with features, such as wireless connectivity, real-time monitoring, and remote-control capabilities, which allow for more efficient and effective management of patient care. This can help healthcare providers stay informed about a patient’s condition in real time, and make adjustments to the dosage or treatment plan as needed.
Wearable infusion pumps are another emerging trend in the field. This can be more convenient for patients, and can also improve patient outcomes by ensuring that they receive the medication they need, even when they are away from the hospital or clinic.
Closed-loop systems are also gaining popularity in the field; these systems use sensors to monitor the patient’s condition and adjust the drug delivery accordingly. This can be particularly useful in cases where the patient’s condition is changing rapidly and the healthcare provider needs to act quickly.
Wireless and battery-powered pumps are also gaining popularity; these pumps are designed to be more portable and to offer increased flexibility of use.
Overall, these advancements and trends in infusion pump technology are helping to improve patient outcomes and make drug delivery more efficient and effective. As technology continues to evolve, AKAS Medical Equipment expects to see even more exciting developments in this field in the coming years and also working toward these trends.
Medtronic buys Affera (USD 925 million value)
Medtronic announced plans last year to buy Affera, a Newton, Mass.-based company that makes cardiac ablation and cardiac mapping devices. The USD 925 million offer included USD 250 million that will be paid out after certain unspecified contingent considerations have been met. Cardiac ablation involves creating small scars in the heart to block irregular electrical signals, intended to treat arrhythmias. Affera’s technology, which is not yet FDA-approved, would give Medtronic its first mapping and navigation system and is intended to treat atrial fibrillation.
Boston Scientific buys Apollo Endosurgery (USD 615 million value)
Boston Scientific set out plans to acquire Apollo Endosurgery, an Austin, Tex.-based maker of endoluminal surgery devices. The minimally invasive procedures are performed using an endoscope through the gastrointestinal tract. The purchase is expected to complement Boston Scientific’s endoscopy business, giving it an entry into the endobariatric market.
Technological advancements and emerging trends in IVD
KCS Negi
National Sales Manager,
Sowar Private Limited (Medical Division)
The world of medical industry is flooded today with innovative new technologies that allow for rapid testing near the patient, even at their homes, which do help in enabling better disease diagnosis with early detection, monitoring, management, and reduction in the time to results as travel time for samples and results is reduced dramatically.
In this regard, Government of India too has played key role in offering latest digital technologies. The convergence of digital technologies and diagnostic tests has set the stage for advancing and improving patient experience. Online platform has revolutionized the trend and is best being utilized by healthcare industry. Booking for laboratory tests from home, home collection of samples, digitizing records, and improved turnaround time are some of the major emerging trends in the lab and diagnostic domain.
In vitro diagnostics (IVDs) play big role in today’s healthcare system. Entire world has already witnessed their importance in the global effort to combat and control the corona virus Covid-19. A well informed public and increased demand for rapid disease identification have helped the in vitro diagnostics industry to flourish in recent years as preventive healthcare is being practiced over reactive healthcare. People no longer wait for the symptoms to manifest and are happy to undergo periodic preventive healthcare check-ups to detect signs early, take necessary precautions, and prevent themselves from picking up diseases. This trend has made a very positive impact on life expectancy and a huge impact on the IVD Market.
The exponential market growth of IVD technologies has encouraged medical devices makers to opt for the latest state-of-the-art equipment, designed to cater to needs of the industry, helping in rapid disease identification, ease of use, and personalized care for patients. One of the technologies that is most heavily influenced by these trends is point-of-care (POC) testing that provides access to rapid results.
Sowar Medical, a name that has established itself among the top organizations in the POC and IVD segments, with strong sales, service, and distribution network all over India, catering to the needs of its huge customer base, has always opted for the newer and latest technologies available in the world of IVD.
Outlook
The MedTech sector continues to face headwinds with deal values down significantly in 2022, and uneven capital market performance. Even so, stakeholders remain optimistic about the 2023 prospects for the sector. The recent reset in valuations may provide opportunities for companies to outperform investor expectations and create shareholder value by focusing on differentiated growth opportunities, such as robotic surgery, structural heart disease, and connected care. Balance sheets and cash flow across the industry remain strong, and M&A is expected to remain a priority for capital allocation.
The services sector will continue to see healthy M&A levels in 2023. Achieving scale will be critical in the various subsectors, for example, in differentiated contract development management organizations (CDMOs) and contract research organizations (CROs), and M&A is a means to that end. Private equity (PE) is expected to continue to be a driving force on this front. PE acquisitions of underperforming public companies in market areas that benefit from secular growth trends will also be a theme in 2023, particularly in the latter half as the debt markets reopen more formally. PE dry powder has never been greater, and the services subsector has long been a favorite.
